The Impact of Trustees' Age and Representation on Strategic Asset Allocations

73 Pages Posted: 8 Dec 2020

See all articles by Rob Bauer

Rob Bauer

Maastricht University; European Centre for Corporate Engagement (ECCE)

Rien Bogman

KPMG

Matteo Bonetti

Maastricht University; De Nederlandsche Bank

Dirk Broeders

De Nederlandsche Bank; Maastricht University

Date Written: December 1, 2020

Abstract

A board of trustees has the fiduciary duty to invest a pension fund's assets in the best interest of its beneficiaries. Trustees' characteristics should not affect their investment decisions. We find two counterfactual artefacts for corporate pension funds. First, a higher average board age lowers the strategic allocation to equity by 7 percentage points after controlling for the pension fund's characteristics. This way the strategic asset allocation does not fully reflect the beneficiaries' characteristics. Second, pension funds with a greater representation of employers on the board allocate more to equities. This fosters a principal-agent problem between employer trustees and beneficiaries.

Keywords: Pension Funds, Asset Allocation, Pension Fund Governance, Agency Problems

JEL Classification: G11, G23

Suggested Citation

Bauer, Rob and Bogman, Rien and Bonetti, Matteo and Bonetti, Matteo and Broeders, Dirk, The Impact of Trustees' Age and Representation on Strategic Asset Allocations (December 1, 2020). De Nederlandsche Bank Working Paper No. 698, Available at SSRN: https://ssrn.com/abstract=3743962 or http://dx.doi.org/10.2139/ssrn.3743962

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

Rien Bogman

KPMG ( email )

Cyber City
Gurgram, Haryana 122002
India

Matteo Bonetti

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

Dirk Broeders (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl/en/research/personal-pages/dirk-broeders/

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

HOME PAGE: http://www.maastrichtuniversity.nl/about-um/faculties/school-business-and-economics

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